In view of the digitization of many parts of the economy, regtech will gain importance and constitute a growing challenge for private organizations as well as for regulators. As far as businesses are concerned, the new technological environment requires the implementation of better risk management and IT compliance systems. Regulators should provide an example of a forward-looking implementation of IT-enabled systems.
A paradigm shift is expected to occur in financial regulation. Among others, the well-known principle of “know-your-customer” (KYC) might be complemented by a new principle, “know-your-data” (KYD). This new perspective leads to more data-driven regulations and compliance models.
Since the challenges rapidly evolve in the technological environment, regtech should be built into a reconceptualized (financial) regulatory regime. The paradigm shift based on a holistic approach will have to put more emphasis on the nexus of data and digital identity. Data needs to be gathered globally on a real-time basis and processed in a coherent way in order to meet the cross-border needs of businesses and regulators.